hi, can you explain what happens when one firm is given all the permits (40 to 0)? and what happens when one firm is given just more of them i.e. 30 to 10?
Good question! The process to find how much each firm will want to produce in the end is the same -- doesn't depend on the initial split. So if you find for example that firm A wants to produce 10 units, and Firm B wants to produce 30 units, and suppose all 40 permits are given to firm A. Then, what happens is firm A will sell 30 of them to firm B. On the other hand if all 40 were given to firm B, then firm B will sell 10 to firm A. Bottom line: Firm A ends up consuming 10 permits, and firm B 30 permits, regardless of original split. And finally if the initial allocation happens to be that they coincidentally gave firm A 10 permits and firm B 30 permits, then simply no trade will occur since they are already at an equilibrium point. Hope this helps!
Very well explained! Thank you.
Thanks for the kind words!
great video, thanks
hi, can you explain what happens when one firm is given all the permits (40 to 0)? and what happens when one firm is given just more of them i.e. 30 to 10?
Good question! The process to find how much each firm will want to produce in the end is the same -- doesn't depend on the initial split. So if you find for example that firm A wants to produce 10 units, and Firm B wants to produce 30 units, and suppose all 40 permits are given to firm A. Then, what happens is firm A will sell 30 of them to firm B. On the other hand if all 40 were given to firm B, then firm B will sell 10 to firm A. Bottom line: Firm A ends up consuming 10 permits, and firm B 30 permits, regardless of original split.
And finally if the initial allocation happens to be that they coincidentally gave firm A 10 permits and firm B 30 permits, then simply no trade will occur since they are already at an equilibrium point.
Hope this helps!
@@Diagknowstics Thanks!
best explanation ! thanks !
Thank you for your kind words! :)